Nash equilibrium is the concept of game theory in economics and it occurs when the companies in a duopoly market react to changes in other production and such reaction continues when unit price reach the point of equilibrium. In a non-cooperative game, such theory helps in determination of optimal solution where there is little incentive for the player to change the strategy that is chosen earlier. This is go because, they do not gain anything if they deviate from the strategy that is chosen initially as they assume that the strategy of other players remain unchanged. The interaction and behaviour between the participants of game is conceptualizes for determining the best possible outcome. If the decision of one player is taken into account by the decision of other player and moreover, decision is taken at the same time, then the decision of other player is also predicted.
The concept is considered to be crucial because it helps in representing the outcome of the scenario because the outcome of everyone is their desire and so they all the winners. The circumstances presented by the Nash equilibrium provides duopolists with strong incentive to agree for sharing the resulting profits and make on the agreement for charging the monopoly price. It can be explained with the help of an example, A and B are two students registering for course and they have the option of either choosing mathematics biology and they do not have the option of discussing with each other. If both A and B register for same course they would have the opportunity of learning together and none of them would benefit if they opt for different course. The outcome of the situation has multiple Nash equilibria.
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